Stock futures were pointing to a solid bounce for Wall Street, following yet another selloff, this time triggered by expectations for faster Federal Reserve tapering as well as worries surrounding the omicron variant of coronavirus.
How are stock-index futures trading?
- S&P 500 futures ES00, +1.16% rose 1.2% to 4,621.75
- Dow Jones Industrial Average futures YM00, +0.84% climbed 317 points, or 0.9%, to 34,775
- Nasdaq-100 futures NQ00, +1.35% jumped 1.4% to 16,379
On Tuesday, the Dow industrials DJIA, -1.86% dropped 652.22 points, or 1.9%, to 34,483.72. The S&P 500 SPX, -1.90% fell 88.27 points, or 1.9%, to 4,567, while the Nasdaq Composite COMP, -1.55% declined 245.14 points, or 1.6%, to 15,537.69. The Russell 2000 index RUT, -1.92% slid 1.9% to 2,198.91, just shy of a close of 2,198.47 that would have put it in correction territory, defined as a fall of at least 10% from a recent peak.
What’s driving the markets?
Volatility has stalked global assets since South African scientists announced the discovery of a new and potentially more contagious variant of coronavirus on Friday. Stocks sank Tuesday after Moderna MRNA, -4.36% CEO Stéphane Bancel expressed doubt that current vaccines will offer enough protection for vaccinated individuals from the omicron variant.
Read: ‘Don’t freak out’: Omicron is bound to disrupt supply chains. The question is, how bad will it be?
The second whammy for stocks came after Federal Reserve Chairman Jerome Powell spoke of speeding up the tapering process, given a “very strong” economy and “high” inflation pressures. He made the comments to the Senate Banking Committee on Tuesday where he appeared alongside Treasury Secretary Janet Yellen.
While Wednesday pointed to a more positive session, analysts said the market will remain laser focused on updates over the omicron variant, with data expected over the next two weeks or so.
“While Powell decided to retire the phrase transitory when discussing inflation, the fact is that this latest variant runs the risk of ensuring this current hawkish tone is in itself somewhat temporary in nature,” said Joshua Mahony, senior market analyst at IG, in a note to clients.
“With the risk of future lockdowns and economic closures, comments from the Fed and BoE should be taken with a pinch of salt given how much they could change once we find out the full extent of this variant,” said Mahony.
The U.S. is reportedly set to announce further travel restrictions this week, among them a requirement that all incoming air travelers be tested for COVID within a day of their flight. Details are being completed ahead of a planned speech from President Joe Biden on Thursday, where he is expected to detail the country’s plan to control the pandemic this winter.
November payrolls data will be released on Friday, with the ADP private-sector payroll report due Wednesday at 8:15 a.m. Eastern Time, followed by the November Institute for Supply Management manufacturing index and October construction spending, both at 10 a.m.
Powell and Treasury Secretary Janet Yellen will make a second Capitol Hill appearance together on Wednesday and the Fed’s Beige Book of economic conditions is coming at 2 p.m. Eastern.
Crude oil was also rebounding strongly from a sharp selloff on Tuesday. January West Texas Intermediate crude climbed 4.8% to $69.31 a barrel, while global benchmark Brent BRN00, +4.78% jumped 4.8% to $72.52 a barrel. Goldman Sachs strategists said the oil market reaction has been “excessive” in relation to the omicron variant.
How are other assets trading?
- Gold futures GC00, +0.66% rose 0.6% to $1,784 an ounce.
- The Stoxx Europe 600 SXXP, +0.91% rose 1.1% and London’s FTSE 100 UKX, +1.24% rose 1.3%.
- In Asia, the Shanghai Composite SHCOMP, +0.36% rose 0.3%, while the Hang Seng Index HSI, +0.78% gained 0.7% and Japan’s Nikkei 225 NIK, +0.41% rose 0.4%.
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